355.4A-205 Erroneous payment orders.
(1)
(2)
(3)
If an accepted payment order was transmitted pursuant to a security procedure for
the detection of error and the payment order:
(a) Erroneously instructed payment to a beneficiary not intended by the sender;
(b) Erroneously instructed payment in an amount greater than the amount
intended by the sender; or
(c) Was an erroneously transmitted duplicate of a payment order previously sent
by the sender, the following rules apply:
1.
If the sender proves that the sender or a person acting on behalf of the
sender pursuant to KRS 355.4A-206 complied with the security
procedure and that the error would have been detected if the receiving
bank had also complied, the sender is not obliged to pay the order to the
extent stated in paragraphs 2. and 3.
2.
If the funds transfer is completed on the basis of an erroneous payment
order described in clause (a) or (c) of subsection (1), the sender is not
obliged to pay the order and the receiving bank is entitled to recover
from the beneficiary any amount paid to the beneficiary to the extent
allowed by the law governing mistake and restitution.
3.
If the funds transfer is completed on the basis of a payment order
described in clause (b) of subsection (1), the sender is not obliged to pay
the order to the extent the amount received by the beneficiary is greater
than the amount intended by the sender. In that case, the receiving bank
is entitled to recover from the beneficiary the excess amount received to
the extent allowed by the law governing mistake and restitution.
(a) If the sender of an erroneous payment order described in subsection (1) is not
obliged to pay all or part of the order; and
(b) The sender receives notification from the receiving bank that the order was
accepted by the bank or that the sender's account was debited with respect to
the order, the sender has a duty to exercise ordinary care, on the basis of
information available to the sender, to discover the error with respect to the
order and to advise the bank of the relevant facts within a reasonable time, not
exceeding ninety (90) days, after the bank's notification was received by the
sender. If the bank proves that the sender failed to perform that duty, the
sender is liable to the bank for the loss the bank proves it incurred as a result
of the failure, but the liability of the sender may not exceed the amount of the
sender's order.
This section applies to amendments to payment orders to the same extent it applies
to payment orders.
Effective: July 14, 1992
History: Created 1992 Ky. Acts ch. 116, sec. 36, effective July 14, 1992.
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